Venezuela oil output hits 16-year low as chems mull ethane imports

HOUSTON (ICIS)–Venezuelan oil production reached 830,000 bbl/day in April, the lowest level since January 2003, the US Energy Information Administration (EIA) said on Monday.

Meanwhile, the Venezuelan Petroleum Chamber has called for the country to import ethane as a short-term solution to feedstock shortages at the nation’s Ana Maria Campos petrochemical complex in the state of Zulia.

The chamber did not disclose operating rates at the complex or explain the cause of the feedstock shortage.

However, it mentioned that the complex had originally relied on associated gas, which is extracted from oil. Moreover, that associated gas is needed immediately for enhanced oil recovery in Venezuela, the chamber said.

Venezuelan oil production has fallen sharply during the last 20 years, according to the EIA. In 2001, it exceeded 3m bbl/day. The EIA expects oil production to continue falling through the end of 2020, and the decline could accelerate as US sanctions kick in.

By 28 April, companies using the US financial system must end transactions with PdVSA, the Venezuelan state energy producer, the EIA said.

By 27 July, US oil companies involved in Venezuela’s crude sector must cease operations.

These will come on top of sanctions the US has already imposed on Venezuela. On 25 January, the US banned exports of petroleum products. Venezuela uses those products to process its heavy oil.

The same order required payments for PdVSA petroleum and petroleum products to be placed into an escrow account that the company cannot access.

Even without these sanctions, Venezuelan oil production would probably continue to fall. A series of power outages that started on 7 March cut electricity to Venezuela’s oil-producing regions, the EIA said. These power outages likely damaged reservoirs and infrastructure.

The outages shut down Venezuela’s upgraders, the EIA said. These units upgrade the extra-heavy crude oil that the country produces.

It is unclear how much of Venezuela’s domestic ethane supplies relied on oil production. But countries such as Mexico rely heavily on the associated gas produced from oil wells to supply feedstock to the petrochemical industry.

The Venezuelan Petroleum Chamber proposed importing ethane as a short-term solution.

This ethane would likely come from the US, and the chamber did not explain how Venezuela would import ethane while the US sanctions are in place.

Longer term, the chamber recommended that the country develop on-purpose gas from reserves in Lake Maracaibo. This could require changes in existing regulations.

Another option would be to develop closed wells that still contain gas, the chamber said. It estimates that Venezuela could recover 200m cubic feet/day.

Gas from Paraguana also has some ethane and that could be extracted and used as feedstock, the chamber said.

Venezuela uses methane for enhanced oil recovery, and the ethane associated with this methane could be used as feedstock.

These longer term projects would require infrastructure, the chamber said.

The Venezuelan Petroleum Chamber represents the country’s private petroleum sector.

Image above shows a pumpjack in front of the Venezuelan flag. By Shutterstock